e>. 


IMAGE  EVALUATION 
TEST  TARGET  (MT-S) 


1.0 


I.I 


25 


14^  128 

|50     *'^* 

:^  124  = 

::  i:£   lllllio 


12,2 


1.8 


1.25      1.4 

1.6 

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► 

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/2 


A 


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7 


Photographic 

Sciences 

Corporation 


23  WEST  MAIN  STREET 
"^     WEBSTER,  NY.  14580 
(716)  872-4503 


1^  >i^ 

■0    V   ...^ 


[/. 


CIHM/ICMH 

Microfiche 

Series. 


CIHM/ICIVIH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microreproductions 


Institut  Canadian  de  microreproductions  historiques 


1980 


Technical  and  Bibliographic  Notes/Notes  techniques  et  bibliographiques 


The  Institute  has  attempted  to  obtain  the  best 
original  copy  available  for  filming.  Features  of  this 
copy  which  may  be  bibliographically  unique, 
which  may  alter  any  of  the  images  in  the 
reproduction,  or  which  may  significantly  change 
the  usual  method  of  filming,  are  checked  below. 


D 


n 


D 
D 


n 


D 


Coloured  covers/ 
Couverture  de  couleur 


I      I    Covers  damaged/ 


Couverture  endommag^e 


Covers  restored  and/or  laminated/ 
Couverture  restaurie  et/ou  pellicul6e 


I      I    Cover  title  missing/ 


Le  titre  de  couverture  manque 

Coloured  maps/ 

Cartes  g6ographiques  en  couleur 

Coloured  ink  (i.e.  other  than  blue  or  black)/ 
Encre  de  couleur  (i.e.  autre  que  bleue  ou  noire) 


I      I    Coloured  plates  and/or  illustrations/ 


Planches  et/ou  illustrations  en  couleur 

Bound  with  other  material/ 
Reli6  avec  d'autres  documents 

Tight  binding  may  cause  shadows  or  distortion 
along  interior  margin/ 

LB  reliure  serr6e  peut  causer  de  I'ombre  ou  de  la 
distortion  le  long  de  la  marge  intdrieure 

Blank  leaves  added  during  restoration  may 
appear  within  the  text.  Whenever  possible,  these 
have  been  omitted  from  filming/ 
II  se  peut  que  certaines  pages  blanches  ajoutdes 
lors  d'une  restauration  apparaissent  dans  le  texte, 
mais,  lorsque  cela  6tait  possible,  ces  pages  n'ont 
pas  6t6  film^es. 

Additional  comments:/ 
Commentaires  suppl6mentaires: 


T 
ti 


L'Institut  a  microfilm^  le  meilleur  exemplaire 
qu'il  lui  a  M  possible  de  se  procurer.  Les  details 
de  cet  exemplaire  qui  sont  peut-Atre  uniques  du 
point  de  vue  bibliographique,  qui  peuvent  modifier 
une  image  reproduite,  ou  qui  peuvent  exiger  une 
modification  dans  la  mdthode  normale  de  filmage 
sont  indiqu6s  ci-dessous. 


□    Coloured  pages/ 
Pages  de  couleur 

I     1/  Pages  damaged/ 
I  |/l    Pages  endommagdes 

n    Pages  restored  and/or  laminated/ 
Pages  restaurdes  et/ou  pelliculdes 

I     Y  Pages  discoloured,  stained  or  foxed/ 
I  v/l    Pages  ddcolordes,  tachetdes  ou  piqu6es 


I      I    Pages  detached/ 


Pages  d^tachdes 

Showthrough/ 
Transparence 

Quality  of  prir 

Qualitd  indgale  de  I'impression 

Includes  supplementary  materia 
Comprend  du  materiel  supplementaire 


I      I    Showthrough/ 

I      I    Quality  of  print  varies/ 

I      I    Includes  supplementary  material/ 


n 


Only  edition  available/ 
,Seulc  Edition  disponible 

Pages  wholly  or  partially  obscured  by  errata 
slips,  tissues,  etc.,  have  been  refilmed  to 
ensure  the  best  possible  image/ 
Les  pages  totalement  ou  partiellement 
obscurcies  par  un  feuillet  d'errata,  une  pelure, 
etc.,  ont  6t6  filmdes  6  nouveau  de  fapon  d 
obtenir  la  meilleure  image  possible. 


T 
P 

0 

fi 


C 

b 

tl 
s 
o 

fi 

s 
o 


T 

s 
T 

V 

d 

e 
b 
ri 
r« 
n 


This  item  is  filmed  at  the  reduction  ratio  checked  below/ 

Ce  document  est  filmd  au  taux  de  reduction  indiqu6  ci-dessous. 

10X  14X  18X  22X 


26X 


30X 


y 

12X 


16X 


20X 


24X 


28X 


32X 


The  copy  filmed  here  het  been  reproduced  thanks 
to  the  generosity  of  : 

Douglas  Library 
Queen's  University 


L'exemplaire  film*  f ut  reproduit  grice  A  la 
gAnArositA  de: 

Douglas  Library 
Queen's  University 


The  images  appearing  here  are  the  best  quality 
possible  considering  the  condition  and  legibility 
of  the  original  copy  and  in  keeping  with  the 
filming  contract  specifications. 


Original  copies  in  printed  paper  covers  are  filmed 
beginning  with  the  front  cover  and  ending  on 
the  last  page  with  a  printed  or  illustrated  impres- 
sion, or  the  back  cover  when  appropriate.  All 
other  original  copies  are  filmed  beginning  on  the 
first  page  with  a  printed  or  illustrated  impres- 
sion, and  ending  on  the  last  page  with  a  printed 
or  illustrated  impression. 


The  last  recorded  frame  on  each  microfiche 
shaii  contain  the  symbol  ^^>  (meaning  "CON- 
TINUED "),  or  the  symbol  y  (meaning  "END"), 
wh  ichever  appiiea. 


Las  images  suivantes  ont  At6  reproduites  avec  le 
plus  grand  soin.  compte  tenu  de  la  condition  at 
de  la  nettet*  de  l'exemplaire  film6,  et  en 
conformit6  avec  les  conditions  du  contrat  de 
filmage. 

Les  exemplaires  originaux  dont  la  couverture  en 
papier  est  ImprimAe  sont  filmis  en  commen^ant 
par  le  premier  plat  et  en  terminant  soit  par  la 
derniire  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration,  soit  par  le  second 
plat,  salon  le  cas.  Tous  les  autres  exemplaires 
originaux  sont  filmAs  en  commen^ant  par  la 
premiere  pa^e  qui  comporte  une  empreinte 
d'impression  ou  d'illustration  et  en  terminant  par 
ia  derniAre  page  qui  comporte  une  telle 
empreinte. 

Un  des  symboles  suivants  apparaitra  sur  ia 
derniire  image  de  cheque  microfiche,  selon  le 
cas:  le  symbols  —^  signifie  "A  SUIVKE' ,  ie 
symbole  V  signifie  "FIN". 


IVIap&.  p<u^9,  rharts,  etc.,  may  be  filmed  at 
different  :    ^uctiiin  ratios.  Those  too  large  to  be 
entirely  inctuded  in  one  exposure  are  filmed 
beginning  in  the  upper  left  hand  corner,  left  to 
right  and  top  to  bottom,  as  many  frames  as 
required.  The  following  diagrams  illustrate  the 
method: 


Les  cartes,  planches,  tableaux,  etc.,  peuvent  dtre 
film6s  A  des  taux  de  reduction  diffdrents. 
Lorsque  le  document  est  trop  grand  pour  dtre 
reproduit  en  un  seul  cliche,  il  est  filmi  A  partir 
de  i'angie  supArieur  gauche,  de  gauche  &  droite, 
et  de  haut  en  bas,  en  prenant  le  nombre 
d'images  ndcessaire.  Les  diagrammes  suivants 
iilustrent  la  mithode. 


1 

2 

3 

32X 


1 

2 

3 

4 

5 

6 

rV  D  D  Pv  1^:  s  s 


r 


(>V    TIIK 


BANKING    SYSTEM    OF    CANADA 


A\!>    iiN    TIIK 


PI 


ei 


RESUMPTION  01^^  SPECII:  PAYiMF^XTS 


IN    THE    UNITED  STATES, 


Oclivci'ctl  bcfoi'e    11(0   ]\c\y    Yoi'k   CiU|Vciilioi|   o\   tlic 


American  Bankers'  Association, 


BY 


Sir  FRANCIS  HINCKS.  K.  C.  M.  G-. 


'  iv 


J'rfsiffcuf  (if  the  (•ons(>Ti(hit<tl   llnuk  of  Ctriiniln    (iiu!   'die  Finmici 

Alinistcr  of  flic  .Dominion. 


^*^^ 


XKW  YORK: 

Pll!LISIIKI>      liV     TIIK      AmEUICAN     BANKKRf,'    AsS' •(  I ATH  >.S , 

247  Bnmdwfiy. 

1877. 


ADDKI'SS  or  SIR  FRANCIS  IllNCKS. 


-♦♦♦- 


Mr.    I*ri'.<i>tiiit  mil}  (Ifiilli'incii  : 

Wlicn  1  ift't  Monlvcal  ii  IVw  daysa^jo  on  a  short  tour,  T  liail  no  idea  that  I  sliould 
hav«'  an  (>in><)rtiinity  of  nttfiidin},'  your  Convt-ntion,  and  of  taking'  part  in  tlu-  dis- 
i'ussinn  of  (|U('stinns  in  wli'cli  for  ni)\V!irds  of  forty  years  I  liave  taken  a  dot'p  inter- 
est, and  t«t  tlx'  study  of  wliicli  I  havr  devoted  luueli  time  and  tluaiglit.  IVruiit  mo 
to  tliank  you  most  sincerely  for  your  eoiirteou.s  invitation,  and  to  assure  yt)U  that  1 
hii^ldy  appreciate  it.  In  accordance  witli  the  sup:fj;estion  of  your  Secretary  that  I 
sliould  ]»refac(>  tlie  few  olistiviitious  that,  Avitii  your  permission,  I  shall  make  on  tho 
.subject  immediately  tuider  discussiun.  with  some  aci-ountof  our  Canadian  monetary 
institutions,  \  shall  endeavor  as  fai  as  po:^sil»Ie,  witliin  the  limits  to  which  1  am 
nece.ssavily  eoiitined,  to  touch  on  those  ]i()iii1,s  whicli  seem  to  me  worthy  of  notico. 
Our  Canadian  banking' system  was  niodtlled  on  that  whicli  formerly  prevailed  voiT 
f^enerally  in  tlm  United  States.  P.anks  wt'r<>  ch-ot(n'(>d  hy  the  Legislature,  with 
paid  up  capitals,  aiul  authority  to  issue  notes  redeemahle  in  .s]>ecie  on  demand. 
The  charters  contained  what  was  known  as  the  double  liability  i-lause.  each  share- 
holder beins  liable  to  the  creditoT's  of  the  chartered  Banks  to  an  amount  e«|ual  to 
his  ])aid  up  stock.  There  was  a  small  tax  on  basik  issues  and  the  banks  were  vv- 
«piired  to  hold  ten  per  cent,  of  their  cai)i(al  in  (iovernnu'iit  securities.  A  short 
time  prior  to  the  Confederation  of  th(>  ]i"'itish  i'l'ovinces  into  the  Dominion  of 
Canada  in  1S(')7  an  attempt  was  made  by  the  (Jovfinment  to  .substitnt<^  a  (.J over n- 
ment  pa])er  curren(\v  for  that  of  the  Hanks,  and  inducenKUits  were  held  out  to  the 
Chartered  Hanks  to  surrender  theii'  rit^lit  (?!'  isscu  .  and  to  use  tlu^  (foveriiment 
notes,  wliich  were  lepil  lenders.  I'lie  liiink  of  ]Mo»itreal  alone  accei»ti'd  the  terms 
proposed  by  the  GovernuK'nt.  In  tiie  year  isCiJl  the  Bank  <'hiirters  expired,  ami  a 
renew«'d  attem]»t  was  made  to  com])el  the  l>iiiiks  to  base  their  issues  on  (H)vt>rMment 
securities,  very  much  on  th(>  jdan  under  vdiicli  the  National  Bank  issues  of  Ww. 
United  States  are  re:'ulated.  When  the  Cioveriimeut  pro])ositiou  was  submitted  to 
Parliament  it  was  found  that  the  op])ositioii  to  it.  especially  from  the  I'rovint'o  <d" 
Ontario,  was  so  stronj^'  that  it  would  lie  impossible  to  i-arry  the  bill,  which  was 
tlu>refor(!  withdrawn  for  the  tinu',  an<l  tlu^  chartei-s  were  all  renewed  for  ayt^ar.  U 
•was  durin;;-  the  ree(  ss  of  r.irliami'ut  in  I.S(;!t  that  I  returned  to  Canada  after  an  ab- 
sence of  about  foui'teen  years  in  the  West  Indies  in  the  .service  of  the  Crown,  'i'he 
^rinister  of  Fin:inc<',  Sir  John  Kose.  had  only  a  few  weeks  previously  intimateil  his 
inti'nlion  of  withdrawiii';'  from  public  life,  and  leaviuf^-  Canada  to  i-eside  perma- 
nently in  1  «oudon.  Other  vacancies  in  the  ( lovernment  occuired  about  the  samcr 
time,  and  a  few  weeks  after  my  return  to  C:inada,  I  was  invited  to  jt»iu  the  Govern- 
ment. When  I  c(<nsented  to  do  so,  I  was  in  liopes  that  the  Finance  Department 
would  be  tilled  by  a  gentleman  well  (pialihed  to  deal  with  the  banking  (]",(  stion,  tho 
settlemejit  of  vhicli  could  not  be  ]»ostp  uied.  When,  however,  the  arrangements 
wei-e  completed,  J  became  3Iinister  of  Finance,  an  olTice  which  I  had  previously 
tilled  duiiufr  a  period  of  seven  years,  terminating  about  tifteeu  years  before  the 
time  of  my  resuming  it.  I  gave  immediate  attention  to  the  Bank  ituestion,  and 
nft(n-  conferring  frankly  with  tiu'  reiiresentatives  of  the  ]>rincipal  banks,  I  was  abh' 
to  mature  measures  which,  having  been  sanctioned  by  the  First  Minister  and  my 
otlurcoUeaguesin  the(iovernment,  wen- approved  of  by  Parliament  and  became  law. 
The  Dominion  note  system  is  so  connected  with  the  JJanking  Act,  which  is  ii  gen- 
oral  mea.sure  applicable  to  all  the-  (Chartered  Banks,  that  it  will  be  convenient  to 
notice  them  tog(>ther.  Prior  to  lH(i!»  the;  G<»vernment  had  full  authority  to  i.ssue 
notes  of  all  denominntions,  but  it  had  no  means  of  circulating  them,  other  than 
under  the  then  subsisting  arrangement  with  the  Bank  of  Montreal,  which  it  was 
desirable  to  terminate,  as  the  other  banks  were  unwilling  to  concur  in  it.     I  pro- 

1 1 1 196 


2 


poHcd  to  tlio  BimkH  that  thoy  .should  consfnt  to  give  np  their  issues  of  smull  notes 
uuder  84,  wliich  should  in  futtire  con-sist  e.\<'hisively  of  Dominion  nf»te«.  I  further 
proi>os<?d  tlmt  instoiid  of  holding  tlieir  reserves  exctlusively  in  gold,  tliey  sliould 
hold  one-jiidf,  or  never  less  than  (Uie-tliird,  in  Dominion  not<^s,  it  being  under- 
stood tlmt  the  (lovtrnnunit  would  not  issue  tlio  denon.iniifions  between  8'>(l  iind  #4. 
The  Government  on  its  part  agre(»d  to  al)andon  the  tax  on  bank  issues,  and  idso  tiie 
reciuiroment  that  tim  banks  should  hold  government  securities  to  the  extent  of  one- 
tuntli  of  their  eupital.  1  may  obsfsrve  here  that  the  tax  on  bank  not<^s  was  the  only 
one  imposed  upon  the  banks  l)ytlie  Dominion  Parliament,  which  never  ent('rtain(>d 
for  a  moment  the  itlea  of  taxing  l)ank  d(>posits  or  baidi  cai)ital,  nor,  indeed,  ami 
aware  that  such  taxes  are  in)posed  in  any  other  country  but  the  United  States.  It 
must  be  borne  in  mind  that  the  ('anadiau  bunks  are  not  n-tpiired  to  iiold  any  special 
percentage  i»f  their  circulation  and  dc^tosits  as  a  re.servi;.  Stntements  are  made 
monthly  t<»  the  (rovernment,  and  puldisluid  without  delay,  but  theam<mntof  re.serve 
is  left  to  the  di.scr(>tion  of  each  bank.  The  Dotninion  legal  tenders  are  reihsemable 
in  gold  by  Assi.stiint  Heceiverdrenoral,  at  Montreal,  Toronto,  Halifax  and  St.  John,  N. 
B.  It  may  bt>  .suppose»l  that  .such  an  nrrangement  woidd  be  fouiul  inconvenient,  as  the 
Toronto  notes  are  a  legal  tcnuler  at  Montreal,  Halifax  ami  St.  John,  though  only 
redeemable  in  Toronto.  In  practice  no  inconvenienect  has  been  felt,  and  though 
I  think  a  .single  oftic('  of  redempti(m  has  much  in  its  favor,  there  seems  nf>  prob- 
ability of  the  present  arrangement  Iteing  disturbed.  The  Dtmiiniou  $1  and  $1  notes 
are  cinndatetl  to  tiie  extent  of  about  thre(>  millions  of  dollars,  but  the  larger  noti'S  are 
kept  by  tlu»  banks  exclusively  as  reserves.  The  agijregate  (rinndation  (»f  Dominion 
notes  is  about  .$1 1,2()(>,()(M>.  S7,2()0,()()0  are  bas»;d  on  Government  securitie.s,  and  for  all 
the  issues  exceeding  that  If  uit,  the  (lovernment  is  re([uired  to  lu»ld  either  gold 
or  bank  deposit  receipts,  the  latter  being  only  ])ermitted  when  the  gold  is  in 
excess  of  the  ptu'centage  recjuired  by  law,  widch  varit^s  from  2o  per  (rent,  upwards, 
increa.sing  as  the  circulation  increases.  Tliere  is  not  the  .slightest  tiuidency  to  infla- 
tion in  the  Government  circulation.  The;  banks  naturally  issue  their  own  fives  and 
foui's  in  preference  to  the  Dominion  small  Jiotes  which  onl}'  circulate  to  the  extent 
of  the  jMiblic  tlemand.  The  large  notes  ar<>  not  kept  in  ex<!ess  of  the  recpiirements 
of  the  banks.  The  eliiet  point  of  ditl'en.'nce  in  our  .sy.stem  from  yomvs,  is  that  the 
banks  are  aliowc'd  to  circulate  notes  to  the  extent  of  tlieir  paid  up  eapibd,  at  their 
discretion,  and  you  will  observe  that  the  assets  held  against  that  liability,  in  excess 
of  the  reserv<s  con.sisi  of  "  bills  discoiuit(>d."  The  National  Bank  as.sets,  held 
agrtin.st  their  bank  note  liability,  consist  of  (rovernment  bonds  depo.si ted  with  the 
treasury.  This  will  explain  the  objection  (uitertained  both  by  the  banks  imd  the 
public,  to  the  various  in'opo.sitii)ns  made  from  time  to  time  to  substitutt;  Govern- 
ment ."Securities  for  commercial  paper.  Another  important  ditlerence  in  our  .system 
from  j'ours  is  tliat  ueaily  all  our  banks  have  a  large;  numl)er  of  bninches  and 
agencies,  while  your  practice;  is  to  have  no  agencies.  I  note  this  dit1'eren(;e  in  our 
.systtnu  from  yours,  without  attempting  to  di.scu.ss  the  merits  of  the  two  sy.stems. 
The  agiiicy  .system  nece.ssitates  vigilant  in.spiH'tion,  and  certainly  has  its  w'eak 
points,  thongli  it  has  likewise  its  advantages.  A  ccuisiderable  bu.sinciss  is  done  by 
advances  on  warehouse  reeeij)ts  for  produce  purchased  in  the  vicinity  of  the  agen- 
cies and  delivered  at  <)ur  c(tmniercial  capital  —Montreal.  Our  banks  deal  largely  in 
foreign  exch:inge,  and  have  nearly  all  London  correspondents,  whih'  two  ov  three 
have  olfiees  of  their  own  in  London  and  Xew  York.  With  r<'gard  to  the  relations 
between  the  Government  liud  tlu*  banks,  I  may  mention  that  the  bank  of  Montreal 
has  been  for  many  years  the  li.scal  agent  of  tlu;  (rovernment,  receiving  the  revenue 
at  all  the  principal  ports  of  I'utry,  and  paying  the  Government  cheques  wherever 
requir«;d.  Tlu>  Governnu-nt  of  Canada  having  charge  of  the  construction  of  public 
works,  has  l)een  a  borrower  in  London,  ami  consecpiently  a  drawer  of  exchange. 
Its  exchange  is  ofl'ered  to  public  competition,  and  the  proceeds  are  occasionally  left 
with  the  purchasing  V)anks,  or  placed  in  special  deposit  at  interest.  The  Govern- 
ment is  also  a  constant  purchaser  of  exchange  to  meet  the  interest  on  its  debt,  and 
this  it  likt^wise  purchanes  by  tender  from  the  banks.  We  have  not  yet  introduced 
the  syst«'m  of  deai'ing  house  settlements  in  Canada.  There  are  no  special  safeguards 
of  solvency,  and  notwithstanding  constant  complaint  of  the  ruinous  manage- 
ment of  estates  by  assignees,  it  strikes  me  that  compositions  with  insolvents 
are  more  rare  with  us  than  in  England.  Gur  savings  bank  law  was  originally 
modelled  on  yours,  but  was  repealed  a  few  years  ago.      We  have  an  admirableiPost 


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they  should 
M'iufj;  iiiulcr- 
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St.  John,  N. 
■nient,  as  the 
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and  though 
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o  the  extent 
eciuirenients 
i,  is  that  the 
tal,  at  their 
iy,  in  excess 
assets,   held 
led  with  the 
nks  and  the 
ut(!  (lovern- 
onr  sy.stem 
anches    and 
fi'Ucrc!  in  our 
vo  systems. 
IS  its  \v<'ak 
s  is  doiu-  by 
if  the  agen- 
il  largely  in 
wo  or  three 
i<^  relations 
>f  Montreal 
he  rev(>nue 
es  wherever 
n  of  public 
'.  ixehange. 
ion  ally  left 
'he  (lovern- 
s  debt,  and 
introduced 
1  safeguards 
s    man  age- 
insolvents 
1  originally 
iirable«Po8t 


Offiee  Savings  Vmuk  systoin,  which  is  being  gi'adnally  extended.  Several  of  the 
chartered  bunks  Inivr  Savings  IJaidc  d'-partinrntM,  and  then'  are  tlirec  other  savings 
banks,  one  at  >[oiitn'uh  one  at  (j)ii<'b(M'  and  one  at  'rorontu,  which  were,  at  tlie  time 
of  tile  repeal  of  tii(>  ohl  act,  s])e('iiilly  chartered.  It  was  deemed  (>x))edient  by  our 
(biveninieiit  aU'l  Fiegislatun'  that  institutions  receiving  deposits  from  the  poorer 
clas,s<>s  of  soiMcty  should  givi^  the  same  set  nrity  as  tiinse  rect'iving  tht;  dei>o,sits  of 
tlu^  wealthier  classes,  and  when  the  ol.i  savings  l»aid\  act  expired,  about  six  years  ago, 
it  was  not  reiiewt'il,  and  tlic  few  existing  institutions  were  given  the  oj)tion  either 
to  amalgamate  witli  a  chartered  ba»k  or  t">  organizes  with  a  large  subscribed  capital, 
twenty-tive  per  cent,  of  which  should  be  paid  n\),  or  to  wind  ti[>.  Of  the  live  insti- 
tutions then  existing  two  wouml  up.  paying  their  dci)ositors  in  fidl,  two  organized 
with  a  proprietary — one  with  a  capitid  of  t\v(»  millions,  the  other  wit^li  one  million, 
and  one  obtained  a  sjiecial  temporary  act  to  continue  on  its  old  footing.  The 
Canadian  municipalities  have  a  considerable  indt'btedness,  chietly  owing  to  the 
num(>rous  bonu.ses  given  to  railways.  Tht\v  are  r.Mpiired  to  submit  all  iiy-laws  for 
creating  these  obligatitms  for  the  approval  of  the  tax-payers  l)y  speciid  vote,  and  there 
are  stringent  provisions  in  the  municipal  act  for  enforcing  payment  of  siu^h  ol)liga- 
tionsby  meansof  rates  leviable  by  th(^  sheritt's.  I  fear  that  [  have  occupied  too  much 
time  with  these  i)reliminary  observations,  which  I  have  mad<!  in  accordance  with  a 
suggestion  to  that  etTe<'t.  Tlie  immediate  subject  for  j>resent  discussion  is  the  resump- 
ti<m  of  .specie  payments,  and  I  can  assure  you  that  it  is  one  in  which  your  Canadian 
neighbors  feel  a  v«'ry  deep  interest.  I  have  long  ol).serve(l,  with  regret,  that  the 
advocates  of  an  inconvertible  [)aper  <*urrencv  in'e  l)oth  numerous  and  active,  whilo 
on  the  other  hand  the  advocati's  of  resumption  seem  to  be  <piite  disunited,  I  am 
not  an  inattentive  ob.stu'ver  of  what  is  going  on  amor  %  '»u,  l)ut  I  confess  that  I  am 
wholly  unable  to  discover  how  the  oj)ponents  of  resJnuption  cxptH'i  to  rcali/c;  th»! 
advantages  which  it  is  their  object  to  attain.  They  profess  to  a)»pri>heiid  that  the 
con.se([uence  of  nisumption  Avould  1k>  a  contraction  of  the  currency,  the  etVect  of 
which  would  b(>  to  limit  the  loaning  power  of  tin;  banks.  Now,  I  ap[)rehend  that 
the  loaning  ptnvjM-  of  th(^  National  Banks  is  limittMl  i)recisely  as  it  is  with  us — by 
the  amount  of  their  capital,  deposits  and  circi  '  ition.  It  is  the  interest  of  banks  to 
loan  as  much  as  they  can  do  with  safety.  If  the  National  JJanks  were  eiialded 
to  issue  inconvertible  notes  very  much  at  their  discretion,  as  the  old  (ihar- 
tered  banks  were  during  the  snsp(>nsioii  of  !,s:J7.  tliere  would,  of  coinvse.  be  an 
increase  to  their  loaning  powt>r  ;  but  under  the  present  .system,  tiie  National 
Banks  cannot  increa.se  their  circulation,  and  it  really  is  unimixirtant  to  them 
whether  they  are  bound  to  redeem  their  lialtilities  in  convertilile  or  incouvertiltle 
It^gal  tenders.  I  beli(;ve  that  the  tendency  of  resumption  woiild  l»e  to  increase  the 
loaning  ])ower  of  the  National  Banks.  I  assume  tliat  it  is  found  protitaltle  to  issu(i 
national  l)ank  notes  on  tli((  present  basis,  otherwise  tliey  would  not  !)e  issued. 
Now,  I  Itelieve  that  the  tendency  of  resumption  would  l)e  to  cause  a  considerable 
sub.stitution  of  National  J>ank  notes  for  legal  t  -nders.  Under  the  ])resent  .system 
there  cannot  be  a  redundant  issui'  of  National  Bank  notes,  and  on  the  assumption 
that  then'  is  a  redumlant  issu(^  of  legal  tenders,  such  i^siie  <loes  not  incrciiso  thu 
loaning  power  of  the  b  ndis,  and  as  no  commercial  pajier  is  hehl  against  it,  its  in- 
crciise  or  diminution  would  oidy  be  felt  in  an  increase  i>v  redin-tion  of  the  premium 
on  gold,  which  is,  and  must  continue  to  be.  lUitwitlistauiling  any  legislali<ni  in  a 
contrary  diivction,  the  real  measure  of  value.  The  legal  tender  circulation  is  at 
present  about  three  hundred  and  fifty  millions.  If  it  were  reduced,  by  any  nuians, 
to  three  humh'ed  millions,  g(dd  would  ]»roi»al)ly  be  at  par.  If  it  were  increased  by 
fifty  millions,  there  would  l>e  a  consideral)lc  incrcasi^  in  the  premium  on  gold.  If 
a  bi-metallic  stauihird  were  adopii'd,  gold  would  be  at  a  hitrher  )»remium  than  it  is 
at  present,  but  would  not  ceas(!  to  be  the  real  stainlard.  Among  the  a<lvocatt!s  for 
resumption  there  are  .some  who  de.sire  to  withdraw  the  l(!gal  tenders  entirely  from 
ciroxilation.  It  seems  probable  that  this  pro})o,sition  is  sujjported  in  the  interest 
of  the  National  BanLs.  My  own  c(Uiviction  is  that  under  su(,'h  a  system  as  we 
have  in  Canada,  the  National  Banks  as  well  as  tln>  people  at  large  would  materially 
benefit  l»y  the  retention  of  legal  tender  circulation.  The  chief  object  of  maint.iin- 
ing  that  circulati<m  is  to  economi/e  the  use  of  gold  or  silver,  if  the  latter 
standard  .should  be  adopted.  If  the  legal  teruii'rs  wiu'c  withdrawn  every  bank  in  the 
United  States  would  have  to  keep  its  reserves  in  coin  to  Tueet  its  liabilities  on  de- 
mand, although  in  i>ractice  the  City  of  New  York  is  the  national  clearing  centre  of  the 


Unitod  states,  as  London  is  for  the  UnitcMl  Kiiij^iloni.  Tlio  cost  to  tlio'nation  of 
maintaining' tlit'HH  coin  icscrvrs  wonM  Im- cnorniouH,  hnt  tlic  inconvonifnco  wcmld 
be  felt  even  inoH',  and  tills  would  lu-  intcnsitlrd  if  it  should  la?  nrcrssmv  to  move 
silver  instead  of  j^old.  I  lulirvc  that  if  nil  rlvalr^v  Itctwem  tlio  fj;ovcrnnu'nt  and  tlu« 
National  Jlanks  cotdd  las  rrniovrd,  tho  convenience  to  the  latter  of  the  Ic^jal  trndei- 
notes  would  indu<'e  them  to  withiliaw  all  opposition  to  their  issue,  That  it  is  poH- 
sihle  tt)  avoiil  liviili-y  our  Cauadian  expericuce  places  Itevond  n  doultt.  Were  it  not 
for  the  small  note  issue  for  tJie  KurrentUr  of  whii-h  our  hanks  ^ot  an  equivalent  in  the 
aholition  of  the  hank  tax,  a  ( lovernmeMt  laite  wouM  never  he  seen  hv  the  f^cneral 
public  in  ("anadii.  The  notes  from  .■!:.')()  to  .'^l.tKMI  nrcheld  bv  the  baidis  as  resevvos, 
and  ('(Mistitute  a  nuu-h  more  convenient  instrunu'iit  than  coin  for  settling  Ital- 
auces.  I  think  that  in  the  I'nited  Stati'sit  would  be  desirable  that  a  mutuid  under- 
stantlinj,'  shouhl  be  arrived  at  lietweeu  the  Treasury  and  the  banks  to  the  elVeet  that 
the  former  would  issm^  no  notes  between  either  .SKMl  cu-  S."().  and  a  small  lienomina- 
ti<ui  luuler  80.  'I'he  National  Haidvs  slutuld  be  satislicd.  I  tliink,  with  the  eireidation 
of  notes  of  sr*  and  upwards.  The  practical  elVect  would  be  that  the  ( iovernment 
note  eireidation  would  be  limited  to  the  reiiuirements  of  the  banks  for  reserves,  und 
the  notes  uiiiler  .S'».  1  believe  that  the  elVeet  of  such  a  l)lau  as  [  have 
indicated  Would  i»e  to  increase  the  National  I'ank  circulation  and  thereby  the  loan- 
in^;' power  of  tlu- banks,  and  to  Rive  the  nation  a  bank  note  ctirrencv  superior  to 
that  in  any  country  in  the  world. 

T  am  aware  that  duiine-  tlie  last  two  ye.irs  there  has  been  u  reduction  in  the  Na- 
tional IJauk  ( 'apital,  aial  this  would  lead  to  the  inferi'iice  that  new  capital  would  not 
be  subscribed  even  if  it  wi're  to  lead  to  an  extended  circulati«m.  J  do  not  think 
such  an  iid'erence  would  be  corr«>ct.  The  reduction  of  capital  I  attributi;  to  tho 
policy  of  tlu'  eov(>runient  which  is  driviiifj;  capital  out  of  baidiin^  by  excessive  taxa- 
tion. If  national  bank  notes  were  obtainable  (u*  a  deposit  of  -t  per  ci'iit.  bonds,! 
believe  that  they  would  be  apl)lietl  foi'.  and  taki>  the  place  of  le<,'al  tenders  t<(  a 
considerable  extent.  I  have  not  adv/rteil  to  the  mode  of  <'iVectin^'  or  pre]>aring 
for  lesumiition,  and  1  labor  under  the  disadvantajjfc*  of  beintj;  unaware  of  the 
impediments  in  the  way  of  a  {gradual  substituticui  of  I'nited  States  interest-bear- 
in{^'  IkuuIs  for  any  rcilunilaiit  issues.  The  i)rice  of  ^old  wiudil  lead  to  tho  in- 
ference that  the  legal  tender  issues  are  not  much,  if  at  all,  in  excess  of  the  public 
re(|uirements.  ^Monthly  sales  of  United  States  4  jier  cent,  bonds  for  lej^al  tender 
■would  soon  brine  them  to  par,  and  if  my  oi)inion  should  i)rove  correct  that  after 
r(\snmption.  National  Dank  notes  would  taki'  the  place  of  legal  tenders  to  a  considi-r- 
abl(f  extent,  the  practical  c^Hect  would  be  that  I'nited  States  bonds  would  be  dc- 
l)ositcd  for  such  increasi'd  national  issues,  and  would  I'eplace  the  present  legal 
tenders.  If  it  were  ascertained,  as  it  soon  would  be  under  a  couvi-rtibk'  system, 
whatamoun;  of  legal  lenders  would  be  re<(uired  lor  public  convenience,  there  would 
be  )io  ditVirulty  in  maintaining  an  adeipiate  reserve  of  coin  at  the  oilice  of  redemption, 
which  should  certainly  b((iii  New  York  and  not  in  Washington.  1  nuiy  litre  obsirve, 
that  in  tinu's  of  paiuc  which,  it  may  be  feared.  >vill  occur  from  time  to  time  in  all 
countries  where  extensive  cr(  dits  ai'c  given,  there  woidd  b(>  less  danger  of  large 
deniamls  for  gold  in  redem]ttion  of  k'gal  tender  notes  in  the  United  States,  than  iu 
England.  In  the  Uuitcnl  States,  and  in  Canada  likewise,  each  bank  keeps  an  ade- 
(|uate  reserve  to  meet  its  lialiilities,  and  would,  for  its  own  sake,  endeavor  to  keep 
that  reserve  as  sti'oug  as  jjossible.  in  l-jigland,  it  is  admitted  by  all  the  V)est  writers 
on  the  subject,  that  the  banks  generally  rely  on  the  Bank  of  England  to  carry  the 
connnercial  clasM's  through  a  ]»anie.  That  bank  is  t'ae  custodian  ci  thi^  national 
reserve,  and  any  oju'  who  examines  the  bank's  statements  a  wi'ck  or  two  V)etore  the 
Ovcrend,  (Jurney  ic  Co.  failure  in  ISfiC)  and  those  a  fortnight  kiter,  will  at  once  per- 
ceive what  a  load  that  bank  is  obliged  to  carry  at  a  ])criod  of  financial  embarrass- 
ment. In  America  tho  bunion  would  fall  on  the  banks  generally,  and  wonld 
certainly  not  be  so  embarrassing.  I  \m\o,  I  fear,  trespassed  too  long  on  your  atten- 
tion, and  liavt'  to  otTer  my  aiiologies  for  the  dt'fects  of  this  paper,  wliich  I  have  had 
to  i)repare  (piitc  nnexpoetedly,  and  without  having  had  any  opportunity  to  considt 
nnthorities.  I  mnst,  therefore,  throw  myseJf  on  your  indnlgenee  and  have  to  thank 
you  for  the  opportunity  of  being  present  on  such  an  interesting  occasion. 


I 


'  tli(>'nntiou  of 
.('liiriK'c  Woiihl 
I'Msjiiv  to  move 

DMli'lit  iillil  tll(> 

!<•  If^'iil  ti'iitlcr 
riiiif  it  is  poH- 
Wi'ii'  it  ii(»t 
uiMiliut  ill  tlio 
hy  I  lie  <4('iK!nil 
ks  lis  rcsrrvoH, 
sctMiiiK-  liiil- 
iiiiitiiiil  uiidcr- 
Jli.'  HVfft  tliiit 
lall  liciiniililiii- 

\u'  circulation 
n  (lONCi'limclit 

VL'NcrVCS,    Hlld 

I  us  1  Imvo 
chy  tli(>  loiili- 
!.V  .siipriior  to 

oil  in  the  Xa- 
itiil  Would  not 
«l"  not  think 
trihiito  to  the 
xct'ssive  taxa- 
'cut.  I)ond,s,  I 
tondcrs  t<»  a 
or  pre]  taring 
Lwarc    of   the 
intci'i'st-bc'jir- 
d   to  the  in- 
of  the  puldic 
•  lejial  tender 
ect  that  utter 
:o  a  consith'r- 
ivonld  be  dc- 
)re,sont    legal 
tilth'  system, 
there  would 
redoiuption, 
lore  observe, 
o  time  in  all 
ger  of  Lirgc 
ati's.  tliau  ill 
eeps  au  ade- 
avor  to  keep 
best  writers 
to  carry  the 
the  national 

0  bet'ori'  the 
at  once  i»er- 

1  embarrass- 
and  would 
your  atten- 
I  have  had 

y  to  consult 
ive  to  thank 
I. 


